Senate approves compromise pension measure

Topeka  The Kansas Senate overwhelmingly approved a measure Thursday that seeks to bolster the long-term financial health of the state's pension system by using gambling dollars to pay for retirement benefits.

Senators voted 35-2 for a compromise drafted by negotiators for their chamber and the House to settle dozens of differences between their chambers. The House also expected to approve the measure Thursday, a move that would send it to Gov. Sam Brownback, who is expected to sign it.

The legislation was likely to pass despite opposition from public employee groups, which worry that a new retirement plan will be less generous than existing ones. It would direct future revenues from state-owned casinos to the Kansas Public Employees Retirement System, which projects an $8.3 billion shortfall between anticipated revenues and the benefits promised to public employees through 2033.

The new retirement plan would be for teachers and government workers hired after 2014. It would move away from traditional KPERS plans guaranteeing retirement benefits up front, based on a worker's salary and years of service. However, it would not go as far as 401(k) plans, which are common in private industry and tie benefits solely to investment earnings.

Supporters pushed for a new retirement plan to limit the state's future financial risk in providing benefits to public employees but didn't want the benefits to be too stingy.

"This plan will lower the risk to the employer, and it will provide a fair and reasonable benefit to our public employees," said Sen. Laura Kelly, a Topeka Democrat and one of the negotiators.

Last year, to help close the long-term KPERS funding gap, Brownback and lawmakers boosted the state's annual contributions to the retirement system and required public employees either to contribute more of their salaries or accept less generous benefits. But the Republican governor and many members of the GOP-controlled Legislature didn't think those changes were enough.

The new retirement plan for future hires would pay 5.25 percent annual interest on the state's and workers' contributions to their retirement benefits. Upon retirement, a worker would receive a lump sum that could be converted into an annuity.

If KPERS earns more than 8 percent on its investments in a year, it also could pay a dividend toward workers' retirement benefits. The amount would depend upon how much the long-term funding gap had shrunk.

The "no" votes in the Senate came from Republicans Bob Marshall, of Fort Scott, and Mary Pilcher-Cook, of Shawnee, who said they wanted to start a 401(k)-style plan.

"They did a good job of finding a compromise, but we need to go further," Pilcher-Cook said.

However, an alliance of public employee groups, the Keeping the Kansas Promise Coalition, argued that legislators should have stopped with last year's reforms. Chairman Terry Forsyth, a lobbyist for the Kansas National Education Association teachers union, said the bill is based on "an ideological desire to follow the failures of the private sector and shift all the risk from the state to retirees."

The plan to use casino revenues to help close the long-term KPERS funding shortfall has Brownback's backing and bipartisan support. Kansas has licensed developers to operate casinos in Dodge City, in Kansas City and south of Wichita, and the state receives 22 percent of the gambling revenues.

The state has committed $10.5 million a year in casino revenues through 2021 to state universities' engineering programs. Under the bill, 50 percent of the remaining casino revenues would go to KPERS, starting in July 2013. Supporters predicted that could add up to several billion dollars over the next 20 years, though no solid estimates exist.

A legislator retiring with an annualized pay of $85,820.52, and with 10 years' service, would have an annual KPERS benefit of $15,018.60, for a monthly benefit of $1,251.55, according to KPERS. If the retiring legislator had 20 years' service, the annual benefit would be $30,037.20, and monthly, $2,503.10.

The News asked some KPERS retirees about their pension benefits. Their answers varied widely.

A state employee who was a supervisor for juveniles on probation retired after 34 years with an annual benefit of about $25,000. A municipal wastewater treatment plant superintendent, with 24 years' service, estimated the earned benefit at $2,300 to $2,400 monthly.

A state social services worker in a supervisory role retired in 1995 after 15 years and draws a monthly KPERS benefit of $524. That is equal to the monthly benefit for a county-level commercial appraiser who retired at 65, vested at nine years with KPERS.

'Insult'

Kathy Mendenhall, a public speaking instructor at Hutchinson Community College and past president of the Hutchinson National Faculty Association, had not been aware of the annualized pay formula for legislators.

Whereas Kansas public employees are not unionized, they have virtually no meaningful input on legislation affecting their retirement. I can forsee their retirement amounts becoming less and less in years to come, while inflation makes their purchasing power less and less. Working for the state of Kansas is a deadend decision.